FOCUS ON DELIVERY Merck Q3 2017 results - Marcus Kuhnert, CFO Udit Batra, CEO Life Science - Merck Group
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FOCUS ON DELIVERY Merck Q3 2017 results Marcus Kuhnert, CFO Udit Batra, CEO Life Science November 9, 2017
Disclaimer Cautionary Note Regarding Forward-Looking Statements and financial indicators This communication may include “forward-looking statements.” Statements that include words such as “anticipate,” “expect,” “should,” “would,” “intend,” “plan,” “project,” “seek,” “believe,” “will,” and other words of similar meaning in connection with future events or future operating or financial performance are often used to identify forward-looking statements. All statements in this communication, other than those relating to historical information or current conditions, are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond control of Merck KGaA, Darmstadt, Germany, which could cause actual results to differ materially from such statements. Risks and uncertainties include, but are not limited to: the risks of more restrictive regulatory requirements regarding drug pricing, reimbursement and approval; the risk of stricter regulations for the manufacture, testing and marketing of products; the risk of destabilization of political systems and the establishment of trade barriers; the risk of a changing marketing environment for multiple sclerosis products in the European Union; the risk of greater competitive pressure due to biosimilars; the risks of research and development; the risks of discontinuing development projects and regulatory approval of developed medicines; the risk of a temporary ban on products/production facilities or of non-registration of products due to non-compliance with quality standards; the risk of an import ban on products to the United States due to an FDA warning letter; the risks of dependency on suppliers; risks due to product- related crime and espionage; risks in relation to the use of financial instruments; liquidity risks; counterparty risks; market risks; risks of impairment on balance sheet items; risks from pension obligations; risks from product-related and patent law disputes; risks from antitrust law proceedings; risks from drug pricing by the divested Generics Group; risks in human resources; risks from e-crime and cyber attacks; risks due to failure of business-critical information technology applications or to failure of data center capacity; environmental and safety risks; unanticipated contract or regulatory issues; a potential downgrade in the rating of the indebtedness of Merck KGaA, Darmstadt, Germany; downward pressure on the common stock price of Merck KGaA, Darmstadt, Germany and its impact on goodwill impairment evaluations; the impact of future regulatory or legislative actions; and the risks and uncertainties detailed by Sigma-Aldrich Corporation (“Sigma-Aldrich”) with respect to its business as described in its reports and documents filed with the U.S. Securities and Exchange Commission (the “SEC”). The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere, including the Report on Risks and Opportunities Section of the most recent annual report and quarterly report of Merck KGaA, Darmstadt, Germany, and the Risk Factors section of Sigma- Aldrich’s most recent reports on Form 10-K and Form 10-Q. Any forward-looking statements made in this communication are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. This quarterly presentation contains certain financial indicators such as EBITDA pre exceptionals, net financial debt and earnings per share pre exceptionals, which are not defined by International Financial Reporting Standards (IFRS). These financial indicators should not be taken into account in order to assess the performance of Merck in isolation or used as an alternative to the financial indicators presented in the consolidated financial statements and determined in accordance with IFRS. The figures presented in this quarterly statement have been rounded. This may lead to individual values not adding up to the totals presented. 2
Agenda
Executive summary
Financial overview
Guidance
3
EXECUTIVE SUMMARY
Highlights
Healthcare – pipeline progressing; initial launches of Mavenclad & Bavencio in Europe
Operations Life Science – solid organic growth amid unfavorable mix effect from softer key accounts
Performance Materials – strong growth of non-LC businesses; LC normalization continues
Organic sales growth of 4.2%; EBITDA pre down 8.3% to €1,076 m
Financials Deleveraging on track, net debt/EBITDA pre reduced to 2.3x
EBITDA pre guidance confirmed despite FX headwinds
5
Investments in Healthcare and softness in Liquid Crystals burden EBITDA pre
Q3 2017 YoY net sales • Healthcare reflects strong growth in General
Medicine, Consumer Health and Fertility
Organic Currency Portfolio Total
• Solid organic growth in Life Science driven
Healthcare 5.8% -3.4% -1.2% 1.2%
by all businesses
Life Science 4.8% -3.9% 0.4% 1.3% • Organic growth of ICM1, Pigments and OLED
is outweighed by ongoing market share
Performance Materials -1.5% -3.8% 0.0% -5.3% normalization in Liquid Crystals
Merck Group 4.2% -3.7% -0.4% 0.1% • FX headwinds across all businesses
• Healthcare contains investments in
Q3 YoY EBITDA pre contributors [€ m] M&S and R&D, partially offset by milestone
1,174 -113 payments for Bavencio
+2 -33 +46 1,076
• Life Science reflects organic growth offset by
negative business mix and FX
• Performance Materials lower due to LC
normalization, usual price declines and FX
Q3 2016 Healthcare Life Science Performance Corporate & Q3 2017 • CO contains FX hedging gains and
Materials Other (CO)
1IntegratedCircuit Materials; 2Long Term Incentive Plan LTIP2 benefits
6 Totals may not add up due to rounding
Organic growth in all regions
Regional breakdown of net sales [€ m] Regional organic development
Europe +1.2% • Growth in Europe reflects solid demand in
org.
Life Science, almost offset by competition
for Rebif, Erbitux and Gonal-f
30%
• North America benefits from Life Science
growth and Bavencio more than offsetting
North America +0.7% ongoing Rebif decline
org. Q3 2017
• Strong growth in APAC driven by
Net sales:
33% General Medicine, Fertility and Life Science
€3,727m
25% Asia-Pacific +7.2%
outweighing LC normalization
org.
• Very strong performance in LATAM and
MEA across all major businesses
8%
4%
Latin America +9.2% Middle East & Africa +15.5%
org. org.
7
FINANCIAL OVERVIEW
Q3 2017: Overview of key figures
Key figures Comments
[€m] Q3 2016 Q3 2017 Δ • EBITDA pre decline reflects investments
Net sales 3,724 3,727 0.1% in Healthcare and ongoing LC market
share normalization
EBITDA pre 1.174 1,076 -8.3% • EPS pre down due to lower EBITDA pre
Margin (in % of net sales) 31.5% 28.9%
• Lower operating cash flow driven by
EPS pre 1.70 1.51 -11.2% lower profit & changes in working capital
• Net financial debt benefits from healthy
Operating cash flow 1,067 758 -29.0%
cash flow and Biosimilars divestment
• Working capital reflects increased
[€m] Dec. 31, 2016 Sept. 30, 2017 Δ receivables in Healthcare, higher
Net financial debt 11,513 10,483 -8.9% inventories in all businesses
• Higher headcount related to growth
Working capital 3,486 3,755 7.7% initiatives in Healthcare and Life Science
Employees 50,414 52,843 4.8%
9 Totals may not add up due to rounding
Reported figures reflect divestment of Biosimilars business
Reported results Comments
[€m] Q3 2016 Q3 2017 Δ • EBIT up due to Biosimilars divestment,
EBIT 676 901 33.3% despite lower EBITDA pre
Financial result -67 -65 -2.1% • Lower effective tax rate reflects
divestment of Biosimilars business
Profit before tax 609 836 37.2%
Income tax -149 -187 25.6%
Effective tax rate (%) 24.4% 22.4%
Net income 457 645 41.1%
EPS (€) 1.05 1.48 41.0%
10 Totals may not add up due to roundingHealthcare: Investments in future growth weigh on profitability
Healthcare P&L Comments
[€m] Q3 2016 Q3 2017 • Rebif declines due to competition in U.S. & EU, partially offset by U.S.
pricing
Net sales 1,689 1,708
• Organic decline of Erbitux due to competition and price pressure in EU
Marketing and selling -623 -666
• Fertility portfolio back to growth, despite Gonal-f still facing tough base LY
Administration -65 -71
• Consumer Health with double-digit growth driven by strategic brands
Research and development -322 -423
in all growth markets
EBIT 375 581
• Marketing & selling reflects Bavencio and Mavenclad launches
EBITDA 560 752
• R&D costs visibly ramping up, LY contained ~€40 m provision releases
EBITDA pre 565 453
• EBITDA pre reflects higher R&D and launch costs, exceeding income from
Margin (in % of net sales) 33.5% 26.5% milestone payments for Bavencio and organic growth
Net sales bridge Q3 2017 share of group net sales
€1,689 m 5.8% -3.4% -1.2% €1,708 m
46%
Healthcare
Q3 2016 Organic Currency Portfolio Q3 2017
11 Totals may not add up due to roundingLife Science: Solid organic growth amid negative mix and FX headwinds
Life Science P&L Comments
[€m] Q3 2016 Q3 2017 • Process Solutions posts solid organic growth due to strong demand
for single-use products & services, while key accounts remain soft
Net sales 1,391 1,408
-414 -412 • Applied Solutions shows good organic growth, driven by strong demand
Marketing and selling
in Biomonitoring and Lab Water
Administration -56 -59
• Research Solutions benefits from strong demand for specialty lab
Research and development -63 -60
chemicals across all regions partially fueled by eCommerce
EBIT 216 220
• Profitability reflects organic growth, offset by negative business mix
EBITDA 399 401 and FX headwinds
EBITDA pre 424 426
Margin (in % of net sales) 30.5% 30.2%
Net sales bridge Q3 2017 share of group net sales
€1,391 m 4.8% -3.9% 0.4% €1,408 m
38% Life Science
Q3 2016 Organic Currency Portfolio Q3 2017
12 Totals may not add up due to roundingDemocratization of mAbs market will drive diversification, change, variability
mAb volume projections 2016 to 2021
CAGR ~12% Market
development
• Overall mAbs market will grow
20
~12% CAGR
• Top 10 originator mAbs represent
Volume [kilo tons]
15 ~ 80% of market volume
• In 2021 ~ 90% of the volume will
10 be shared between Top 35 mAbs
• Biosimilars will gain share, but
5 remain a minority mid-term
0
2016 2021
Top 10 mAbs New mAbs Biosimilars
13 Source: EvaluatePharma | Apr 2017Performance consistently at or above market during integration
Merck and Sigma-Aldrich organic growth rates versus market growth
Organic Above-market
growth, % 6.5% 6.3% growth
5.5%
4.5% 7.3%1
3.8% Long-term average
market growth2 ~4%
3.5%
2.6% 3.8%
… 2012 2013 2014 2015 2016 2017+
Merck Sigma-Aldrich
Q3 2017 EBITDA pre margins versus peers2
Life Science ~ 30%
3
Industry leading
~24-25% margins
Integrated peers ~ 24-25%
1Growth for 9M 2015 (organic growth of $152 m on prior 9M 2014 sales of $2,080 m; 2Source: Merck market intelligence and broker research;
14 3Excluding corporate costs; including proportionate corporate costs EBITDA pre margin would be ~ 27-28%Integration of Sigma and synergy generation progressing well
On track to deliver planned synergies of ~ €280 m until 2018
Cost synergies On track Topline synergies
~260
~170
On track
~5
~105
~15 ~20
2015 2016 2017 2018 2015 2016 2017 2018
Net cost synergies Accelerated cost synergies Top-line synergies
Network consolidation and operational Continued integration of sigmaaldrich.com
transformation ongoing − ~80% of relevant products in U.S. and EU are available online
− Consolidated 10 manufacturing and distribution sites − >1/3 of Merck eCommerce orders now contain
products from both legacy companies
− Announced consolidation of 5 further sites
Complete offering in Process Solutions
Combination of customer service centers and offshoring
of transactional tasks
15Focus on strategic growth initiatives will secure long-term growth
Strategic GENE EDITING &
END TO END SINGLE-USE
initiative CELL THERAPY
Offer process development Establish leadership in the fast- Develop tools for gene editing
services with our complete growing single-use bioprocessing and manufacturing services for
Ambition
bioprocessing portfolio segment through standardization cell therapy
especially to small biotechs and capacity expansion
Strategic initiatives are key contributors to €1 bn new product sales ambition in 2022
16Performance Materials: LC market share normalization impacts profitability
Performance Materials P&L Comments
[€m] Q3 2016 Q3 2017 • Organic growth of Integrated Circuit Materials, Pigments and OLED not
fully offsetting Liquid Crystals market share normalization
Net sales 645 611
-59 -56 • Liquid Crystals facing usual price reductions without volume growth,
Marketing and selling
only innovative UB-FFS technology continues to see strong demand
Administration -14 -18
• OLED continues to grow on industry capacity expansion & investments
Research and development -55 -57
• Strong growth in ICM mainly driven by demand for dielectrics
EBIT 213 191
• Growth of Pigments due to strong demand for decorative pigments in
EBITDA 274 246
cosmetic and coating applications
EBITDA pre 282 249
43.7% 40.7% • Profitability reflects business mix, usual Liquid Crystals price decline & FX
Margin (in % of net sales)
Net sales bridge Q3 2017 share of group net sales
€645 m -1.5% -3.8% 0.0% €611 m
16% Performance
Materials
Q3 2016 Organic Currency Portfolio Q3 2017
17 Totals may not add up due to roundingBalance sheet: Deleveraging in progress after Sigma acquisition
Assets [€ bn] Liabilities [€ bn]
38.3 38.3
Cash & marketable securities 1.1
2.9
35.8 35.8
0.9
Receivables 2.6 2.9
2.7 14.1 Net equity
Inventories 13.8
Intangible assets 25.0
22.4 12.6 Financial debt
11.4
1.9
2.0 Payables
2.3
Property, plant & equipment
2.3 Provisions for pensions
4.2 4.2
6.3 7.2 Other liabilities
Other assets 2.5 2.7
Dec. 31, 2016 Sept. 30, 2017 Sept. 30, 2017 Dec. 31, 2016
• Total assets decrease, while equity ratio increases to 38.5% • Lower net equity reflects negative FX mitigated by 9M profit
• Reduction in intangible assets mainly reflects FX (-€2 bn) • Lower financial debt due to bond repayments and FX
• Other liabilities decrease driven by profit transfer to E. Merck KG
18 Totals may not add up due to roundingCash flow: Strong focus on cash generation
Q3 2017 – cash flow statement Cash flow drivers
[€m] Q3 2016 Q3 2017 Δ • Profit after tax includes gain from
Profit after tax 460 649 189 Biosimilars divestment, which is
neutralized in other operating activities
D&A 434 419 -15
• Changes in provisions reflects swing in
Changes in provisions 4 -50 -54 LTIP provision adjustment
Changes in other assets/liabilities 36 99 63 • Changes in working capital include higher
receivables from Glucophage repatriation
Other operating activities 1 -328 -329 & higher inventories; LY contained factoring
Changes in working capital 131 -31 -162 • Investing cash flow contains higher Capex
and Biosimilars cash proceeds ~€150 m
Operating cash flow 1,067 758 -309
• Financing cash flow reflects €700 m euro-
Investing cash flow -223 -90 133 bond repayment in September and bank
loan reduction LY
thereof Capex on PPE -171 -197 -26
Financing cash flow -702 -844 -142
19 Totals may not add up due to roundingGUIDANCE
Full-year 2017 guidance broadly confirmed
Net sales: ~ €15.3 – 15.7 bn
EBITDA pre: ~ €4,400 – 4,600 m
EPS pre: ~ €6.15 – 6.50
212017 business sector guidance
Healthcare Performance
Life Science
Materials
Net sales Net sales Net sales
• Slight organic growth • Organic growth slightly above • Slight to moderate organic decline
• Ongoing organic Rebif decline market, driven by Process Solutions • Volume increases in all businesses
• Other franchises growing; repatriation • First minor contribution of top-line • Continuation of Liquid Crystal market
of Glucophage/China supportive synergies share normalization in China
EBITDA pre EBITDA pre EBITDA pre
~ €1,900 – 2,000 m ~ €1,780 – 1,850 m ~ €950 – 1,050 m
22APPENDIX
Additional financial guidance 2017
Further financial details
Corporate & Other EBITDA pre ~ -€300– -350 m
Interest result ~ -€250 – -260 m
Effective tax rate ~ 23% to 25%
Capex on PPE ~ €850 – 900 m
Q4 2017 - 2018 hedge ratio ~ 60%
Hedging/USD assumption at EUR/USD ~ 1.17 to 1.19
2017 Ø EUR/USD assumption ~ 1.12 – 1.14
25Strong focus on cash generation to ensure swift deleveraging
Net financial debt* and leverage development Focus on deleveraging
[Net financial debt/
EBITDA pre]
• Commitment to swift deleveraging to
4x ensure a strong investment grade
credit rating and financial flexibility
• Strong cash flow will be used to drive
3.5x
3x down leverage to expected
€500 m)
2x 2.3x ruled out for the next two years
(or financed by divestments)Well-balanced maturity profile reflects Sigma-Aldrich financing transactions
Maturity profile as of Sept. 30, 2017
2.4%
Coupon 4.5%
[€ m/US $]
2.95%
3.25%
750 1.375%
4.25%
2.625%
0.75%
1,000
70 1,600
1.7%
1,350 3.375%
1000
800
400 550 500
2018 2019 2020 2021 2022 2023 2024 2025
EUR bonds USD bonds Private placements Hybrids (first call dates)*
Financing structure enables flexible and swift deleveraging
27 *No decision on call rights taken yetLife Science and Healthcare drive organic growth
9M 2017 YoY net sales • Healthcare reflects strong growth in General
Medicine, especially Glucophage in China
Organic Currency Portfolio Total
• Organic performance in Life Science driven
Healthcare 4.2% -0.5% -1.1% 2.7%
by all business units
Life Science 4.1% -0.5% 0.4% 4.0% • Performance Materials organically lower as
market share normalization in LC outweighs
Performance Materials -1.8% 0.8% 0.0% -1.1% growth of other businesses
Merck Group 3.2% -0.2% -0.4% 2.5%
• HC lower due to higher costs for M&S and
9M YoY EBITDA pre contributors [€ m] R&D outweighing organic growth, approval
milestones & royalty income swap
3,416 -65 +92 -77 +44 3,410
• Life Science driven by synergy realization
and organic growth amid negative mix
• Performance Materials burdened by negative
business mix & usual price declines
9M 2016 Healthcare Life Science Performance Corporate & 9M 2017
• CO contains positive FX hedging result
Materials Other
28 Totals may not add up due to rounding9M 2017: Overview of key figures
Key figures Comments
[€m] 9M 2016 9M 2017 Δ • Flat EBITDA pre reflects organic growth,
Net sales 11,194 11,479 2.5% milestones & royalty income swap offset
by LC decline and HC investments
EBITDA pre 3,416 3,410 -0.2% • EPS pre increases due to improved
Margin (in % of net sales) 30.5% 29.7% financial result
EPS pre 4.79 4.85 1.3% • Healthy operating cash flow;
LY burdened by high tax payments
Operating cash flow 1,731 2,055 18.7%
• Net financial debt reflects strong focus
on operating cash flow
[€m] Dec. 31, 2016 Sept. 30, 2017 Δ • Working capital reflects increased
Net financial debt 11,513 10,483 -8.9% receivables in Healthcare, higher
inventories in all businesses
Working capital 3,486 3,755 7.7%
• Higher headcount related to growth
initiatives in Healthcare and Life Science
Employees 50,414 52,843 4.8%
29 Totals may not add up due to roundingReported figures reflect solid business performance and exceptionals
Reported results Comments
[€m] 9M 2016 9M 2017 Δ • EBIT increases despite lower EBITDA
EBIT 2,075 2,283 10.0% pre driven by proceeds from
Biosimilars divestment
Financial result -256 -207 -19.3%
• Improved financial result reflects
Profit before tax 1,819 2,076 14.2% deleveraging; LY negatively impacted
by LTIP* effect
Income tax -451 -482 -6.8%
• Effective tax rate within guidance
Effective tax rate (%) 24.8% 23.2% range of ~23% to 25%
Net income 1,360 1,587 16.7%
EPS (€) 3.13 3.65 16.6%
30 *Long Term Incentive PlanHealthcare: Solid organic growth amid pipeline investments
Healthcare P&L Comments
[€m] 9M 2016 9M 2017 • Rebif declines due to competition in U.S. & EU, while U.S. pricing and
Q2 inventory stocking support performance
Net sales 5,089 5,226
• Erbitux shows organic decline - volume increase in growth markets
Marketing and selling -1,878 -2,033
outweighed by competition and price reductions in Europe
Administration -202 -226
• General Medicine portfolio posts double-digit organic growth driven by
Research and development -1,078 -1,188 strong performance in growth markets and repatriation in China
EBIT 1,314 1,375 • Marketing & selling reflects investments for launches and costs for
1,947 1,847 Glucophage repatriation in China
EBITDA
1,631 1,566 • R&D costs increase due to pipeline development
EBITDA pre
Margin (in % of net sales) 32.0% 30.0% • Profitability benefits from royalty swap, Bavencio milestones and organic
performance, but more than offset by higher R&D and M&S costs
Net sales bridge 9M 2017 share of group net sales
€5,089 m 4.2% -0.5% -1.1% €5,226 m
46%
Healthcare
9M 2016 Organic Currency Portfolio 9M 2017
31 Totals may not add up due to roundingHealthcare organic growth by franchise/product
Q3 2017 organic sales growth [%] 9M 2017 organic sales growth [%]
by key product [€ m] by key product [€ m]
Organic Organic
389 -7% 1229 -5%
436 1300
207 -2% 638 -2%
219 657
Consumer 236 +11% Consumer 686 +7%
219 646
Health Health
169 -4% 533 -7%
182 578
155 +84% 485 +72%
89 286
106 +4% 336 +7%
106 320
93 +14% 276 +13%
84 243
Q3 2017 Q3 2016 9M 2017 9M 2016
32 Totals may not add up due to roundingRebif: Competitive landscape in U.S. and Europe
Rebif sales evolution Q3 2017 Rebif performance
North America Q3 drivers • Rebif sales of €389 m in Q3 2017 reflect
[€ m] organic decline of -6.9% & FX headwinds
Price -5.1% org.
increase Price Price • Competition-driven U.S. volume erosion
300 increase increase Price mitigated by price increases
225
Volume • Market shares within interferons stable
due to high retention rates and long-
150 FX
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
term track record
• Competition from orals and occasional
Europe price adjustments cause ongoing organic
Q3 drivers
[€ m] decline in Europe
140 -12.1% org.
120
Price
100
Volume
80
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
33Erbitux: A challenging market environment
Erbitux sales by region Q3 2017 Erbitux performance
• Sales decline to €207 m driven by slight
[€ m] -1.6% Q3 YoY
organic growth organic decline and FX headwinds
250
• Europe impacted by competition, price
reductions and shrinking market size due
200 +18.8% to increasing immuno-oncology trials
• APAC with slight growth driven by new
150 +1.0%
reimbursement uptake in Taiwan
-12.8%
• LATAM strong especially in Brazil; MEA
100 affected by tender phasing
50 -5.5%
0
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Europe Middle East & Africa Asia-Pacific Latin America
34Strong organic growth of General Medicine driven by all major products
Sales evolution Q3 2017 organic drivers
Fertility
[€ m] • Gonal-f still negative against high base LY
300 and competition from biosimilars in Europe
260 Organic more than offsetting growth in China
220 +4.4% org.
180 • Rest of Fertility portfolio continues to
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 grow double-digit, all regions contributing
Endocrinology • Endocrinology flat as growth in LATAM
[€ m] and EU is offset by lower demand in U.S.
120
Organic • General Medicine benefits from
100
0.5% org. Glucophage repatriation in China
80
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 • Euthyrox and Concor post healthy growth
General Medicine* mainly driven by higher volumes in EU
[€ m]
500
450 Organic
400 17.1% org.
350
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
35 *includes “CardioMetabolic Care & General Medicine and OthersMerck pipeline
Phase I Phase II Phase III Registration
M2698 avelumab tepotinib avelumab - anti-PD-L1 mAb cladribine tablets
p70S6K & Akt inhibitor anti-PD-L1 mAb c-Met kinase inhibitor Non-small cell lung cancer 1L1 lymphocyte targeting
Solid tumors Solid tumors Non-small cell lung cancer avelumab - anti-PD-L1 mAb agent
M3814 avelumab tepotinib Non-small cell lung cancer 2L2 Relapsing multiple sclerosis6
DNA-PK inhibitor anti-PD-L1 mAb c-Met kinase inhibitor avelumab - anti-PD-L1 mAb
Solid tumors Hematological malignancies Hepatocellular cancer Gastric cancer 1L-M1M
M9831 (VX-984) M9241 (NHS-IL12)4 avelumab - anti-PD-L1 mAb
DNA-PK inhibitor Cancer immunotherapy avelumab - anti-PD-L1 mAb
Gastric cancer 3L3
Solid tumors Solid tumors Merkel cell cancer 1L1
avelumab - anti-PD-L1 mAb
M6620 (VX-970) M7824 sprifermin Ovarian cancer platinum resistant/refractory
ATR inhibitor anti-PD-L1/TGFbeta trap fibroblast growth factor 18 avelumab - anti-PD-L1 mAb
Solid tumors Solid tumors Osteoarthritis Ovarian cancer 1L1
M4344 (VX-803) M4112 atacicept avelumab - anti-PD-L1 mAb
ATR inhibitor Cancer immunotherapy anti-Blys/anti-APRIL fusion protein Urothelial cancer 1L-M1M
Solid tumors Solid tumors Systemic lupus erythematosus Oncology
avelumab - anti-PD-L1 mAb
M3541 atacicept Renal cell cancer 1L1
M1095 (ALX-0761)5 Immuno-Oncology
ATM inhibitor anti-Blys/anti-APRIL fusion protein
Solid tumors anti-IL-17 A/F nanobody avelumab - anti-PD-L1 mAb
IgA nephropathy Locally advanced head and neck cancer
Immunology
Psoriasis
M8891 abituzumab – anti-CD51 mAb
M6495 Neurology
MetAP2 inhibitor Systemic sclerosis with interstitial lung disease
Solid tumors anti-ADAMTS-5 nanobody
evobrutinib General Medicine
Osteoarthritis
M7583 BTK inhibitor
BTK inhibitor Rheumatoid arthritis
M5717
Hematological malignancies
PeEF2 inhibitor evobrutinib Pipeline as of November 1st, 2017
Malaria BTK inhibitor Pipeline products are under clinical investigation and have not been proven
Systemic lupus erythematosus to be safe and effective.
evobrutinib There is no guarantee any product will be approved in the sought-after indication.
BTK inhibitor
Multiple sclerosis
1 First Line treatment; 1M First Line maintenance treatment; 2 Second Line treatment; 3 Third Line treatment; 4 Sponsored by the National Cancer Institute (USA);
5 As announced on March 30 2017, in an agreement with Avillion, anti-IL-17 A/F nanobody will be developed by Avillion for plaque psoriasis and commercialized by Merck;
6 As announced on August 25 2017, the European Commission has granted marketing authorization for cladribine tablets for the treatment of highly active relapsing
36 multiple sclerosis in the 28 countries of the European Union in addition to Norway, Liechtenstein and Iceland.Life Science: Ongoing synergy realization drives margin progression
Life Science P&L Comments
[€m] 9M 2016 9M 2017 • Process Solutions benefits from robust demand for single-use, services &
virus removal, against tough comps & softer key accounts business
Net sales 4,217 4,385
-1,248 -1,303 • Applied Solutions delivers good organic growth, due to strong demand
Marketing and selling
for pharma & analytical testing, diagnostics and water purification
Administration -176 -194
• Research Solutions posts slight organic growth driven by specialty
Research and development -190 -190
chemicals business & diagnostic customers outweighing soft U.S. academia
EBIT 486 677
• 9M 2016 EBIT affected by inventory step-up for Sigma-Aldrich
EBITDA 1,026 1,242
• Profitability reflects ongoing synergy realization and organic growth
EBITDA pre 1,233 1,325 partially offset by negative business mix effects
Margin (in % of net sales) 29.2% 30.2%
Net sales bridge 9M 2017 share of group net sales
€4,217 m 4.1% -0.5% 0.4% €4,385 m
38% Life Science
9M 2016 Organic Currency Portfolio 9M 2017
37 Totals may not add up due to roundingPerformance Materials: Liquid Crystals sales decline burdens profitability
Performance Materials P&L Comments
[€m] 9M 2016 9M 2017 • Organic growth of Integrated Circuit Materials, Pigments and OLED cannot
offset Liquid Crystal market share normalization
Net sales 1,888 1,867
-175 -181 • Ongoing Liquid Crystal market share normalization drives sales decline
Marketing and selling
Administration -45 -54 • OLED continues to grow on industry capacity expansion & investments
Research and development -157 -173 • Strong growth of Integrated Circuit Materials driven by all major
material classes, esp. strong dielectrics demand for complex chips
EBIT 613 553
• Healthy growth of Pigments due to solid demand for decorative pigments
EBITDA 808 734
especially in automotive applications
EBITDA pre 829 752
43.9% 40.2% • Profitability reflects negative business mix, usual Liquid Crystal price
Margin (in % of net sales)
reductions as well as higher R&D for future growth projects
Net sales bridge 9M 2017 share of group net sales
€1,888 m -1.8% 0.8% 0.0% €1,867 m
16% Performance
Materials
9M 2016 Organic Currency Portfolio 9M 2017
38 Totals may not add up due to roundingHealthy operating cash flow driven by higher profit and tax effects
9M 2017 – cash flow statement Cash flow drivers
[€m] 9M 2016 9M 2017 Δ • Profit after tax includes gains from Kuvan
Profit after tax 1,368 1,595 227 (LY) & Biosimilars divestment, which are
neutralized in other operating activities
D&A 1,386 1,247 -139
• D&A reduction reflects write-up of
Changes in provisions -42 22 64 Vevey site (~ -€70 m) and Xalkori
impairment (~ €70 m) LY
Changes in other assets/liabilities -396 -101 295
• Changes in other assets/liabilities
Other operating activities -421 -349 72 driven by positive tax effects
Changes in working capital -165 -359 -194 • Investing cash flow contains Vertex and
F-star licensing deals as well as increased
Operating cash flow 1,731 2,055 324 Capex outweighing Biosimilars divestment
Investing cash flow -53 -794 -741 • Financing cash flow reflects repayment of
$250 m and €700 m bond (Q1/Q3);
thereof Capex on PPE -456 -569 -113
LY with higher repayment of debt
Financing cash flow -1,631 -1,318 313
39 Totals may not add up due to roundingExceptionals in Q3 2017
Exceptionals in EBIT
[€m] Q3 2016 Q3 2017
Exceptionals thereof D&A Exceptionals thereof D&A
Healthcare 6 0 -317 -17
Life Science 25 0 24 0
Performance Materials 8 0 2 0
Corporate & Other 25 0 29 0
Total 63 0 -261 -17
40 Totals may not add up due to roundingExceptionals in 9M 2017
Exceptionals in EBIT
[€m] 9M 2016 9M 2017
Exceptionals thereof D&A Exceptionals thereof D&A
Healthcare -245 71 -366 -84
Life Science 207 0 86 3
Performance Materials 21 0 25 7
Corporate & Other 42 0 60 0
Total 25 71 -195 -74
41 Totals may not add up due to roundingFinancial calendar
Date Event
March 8, 2018 Q4 2017 Earnings release
April 27, 2018 Annual General Meeting
May 15, 2018 Q1 2018 Earnings release
August 9, 2018 Q2 2018 Earnings release
42CONSTANTIN FEST SVENJA BUNDSCHUH ALESSANDRA HEINZ
Head of Investor Relations Assistant Investor Relations Assistant Investor Relations
+49 6151 72-5271 +49 6151 72-3744 +49 6151 72-3321
constantin.fest@merckgroup.com svenja.bundschuh@merckgroup.com alessandra.heinz@merckgroup.com
ANNETT WEBER NILS VON BOTH
EMAIL: investor.relations@merckgroup.com
WEB: www.investors.merck.de
Institutional Investors / Institutional Investors / FAX: +49 6151 72-913321
Analysts Analysts
+49 6151 72-63723 +49 6151 72-7434
annett.weber@merckgroup.com nils.von.both@merckgroup.com
EVA STERZEL OLLIVER LETTAU
Retail Investors / AGM / Institutional Investors /
CMDs / IR Media Analysts
+49 6151 72-5355 +49 6151 72-34409
eva.sterzel@merckgroup.com olliver.lettau@merckgroup.comYou can also read
